Continued from STI Analysis -- the next peak and trough ? (49)
STI-2
STI ended at 3261.11 on 2nd Aug 2019 hitting an intra-day low of 3257.38, the lowest level since the gap up on 18th Jun 2019. Most would probably say it is trying to cover the gap. Unfortunately, for Elliott wave principle, there isn't any concept of gap covering. For this scenario STI-2, STI is now doing Intermediate degree wave 2 (I2) correction after hitting the peak of 3415.18 on 29th Apr 2019 forming the end of Intermediate degree wave 1 (a leading diagonal instead of the usual impulse structure). As mentioned in STI Analysis -- the next peak and trough ? (48), the low of 3104.03 on 3rd Jun 2019 followed by the rebound was the completion of Minor degree wave A and start of Minor degree wave B of the I2. The high of 3386.65 on 24th Jul 2019 followed by the drop to 3261.11 as of 2nd Aug 2019 affirmed MB has completed and now STI is in Minor degree wave C of I2.
STI-N
As mentioned before, as long as STI has yet to break above 3940.029, this scenario remains valid.
STI-2
STI ended at 3261.11 on 2nd Aug 2019 hitting an intra-day low of 3257.38, the lowest level since the gap up on 18th Jun 2019. Most would probably say it is trying to cover the gap. Unfortunately, for Elliott wave principle, there isn't any concept of gap covering. For this scenario STI-2, STI is now doing Intermediate degree wave 2 (I2) correction after hitting the peak of 3415.18 on 29th Apr 2019 forming the end of Intermediate degree wave 1 (a leading diagonal instead of the usual impulse structure). As mentioned in STI Analysis -- the next peak and trough ? (48), the low of 3104.03 on 3rd Jun 2019 followed by the rebound was the completion of Minor degree wave A and start of Minor degree wave B of the I2. The high of 3386.65 on 24th Jul 2019 followed by the drop to 3261.11 as of 2nd Aug 2019 affirmed MB has completed and now STI is in Minor degree wave C of I2.
Above is what being generated by the Correction Calculator of the EW Calculator. Clearly the high of 3386.65 was around the 3384.065 (wave B = 90% wave A) value being generated by the software. This value brings out another possible structure for the I2 correction. Apart from the normal zigzag pattern, the 90% level just manages to qualify for a regular flat correction pattern. This has opened up the more possibilities of where wave C will end.
zigzag pattern
wave C = 3075.50 / 3002.069 / 2956.641 / 2919.925 / 2883.209
For this case anything below 2956.641 will invalidate this scenario as value either very near or below last year low of 2955.68 doesn't make a valid wave 1-2 count. For 3002.069 though still represent a valid wave C value but this is more than the 78.6% Fibonacci retracement ratio of 3054 and this runs a high risk that this scenario can be invalidated. Thus, the only meaningful wave C value for a zigzag correction pattern would be 3075.50 -- wave C = 100% wave A and this will fall between the 61.8% to 78.6% Fibonacci retracement ratio of wave 1, a very typical level for a wave 2 correction.
regular flat pattern
wave C = 3211.991 / 3104.03 / 3037.332
The value of 3037.332 is more than the 78.6% Fibonacci retracement ratio and hence runs a high risk of invalidating this scenario. Therefore, the possible ending point for wave C would be 3211.991 or 3104.03 (the same level as of 3rd Jun 2019 low).
While a 5-wave impulse/diagonal wasn't clearly visible for wave A, the appearance of a 5-wave impulse/diagonal for this wave C stretch could be ruling out the zigzag pattern. A zigzag is a 5-3-5 pattern. The missing 5-wave impulse/diagonal in the first half is very difficult to justify a 5-wave impulse/diagonal appearance in the second half. Should a 5-wave impulse/diagonal is visible for the present drop, it should strongly justify the regular flat pattern (3-3-5).
To sum up, STI 3211.991 / 3104.03 / 3075.50 would be the highly possible value to end this I2 correction. Whether it is a zigzag or regular flat pattern that is going to play out for this correction, just have to wait for it to complete. However, at this junction, the most important thing to note is STI 3054 level. This level is the 78.6% Fibonacci retracement ratio and a move below that is an early indication that this STI-2 scenario could be invalidated and high probability that STI-N scenario will be the correct wave count.
As mentioned before, as long as STI has yet to break above 3940.029, this scenario remains valid.
Above showed the wave count for this scenario. SuperCycle degree wave 1 (S1) ended in 2015 and now STI is in SuperCycle degree wave 2 (S2) correction. The Cycle degree wave A (CA) concluded in 2016 and Cycle degree wave B (CB) looks highly ended in 2018. STI now is in the Cycle degree wave C (CC). The up and down as seen since STI hit 2955.68 last year merely is the corrective pattern at Primary degree level. Possible S2 ending point would be between 61.8% to 78.6% Fibonacci retracement ratio -- 2258 to 1905. This means STI has more to drop and at that level, Singapore economy will surely enter recession. As mentioned above STI fell below 3054 is an early indication this scenario is the correct wave count. A break below 2955.68 will definitely enforce that stance.
Believe most investors in Singapore stock would be in a catch-22 situation now especially with the negative events going around (US-China trade war, Singapore economy weakening, etc). Sell now and if wave count is STI-2 will miss the big rally ahead. Don't sell now and if turns out to be STI-N wave count will suffer heavy paper loss next. What's best now is to exercise a strategy such that either scenario one will not lose big or miss the golden opportunity. Not to mention be mentally prepared for the worst like stock market crash and Singapore recession going forward.
Global Events
US Fed cut interest rate by 25 basis point last week as what most expected. However, not sure why majority so excited about US Fed cutting interest rate and even suggesting maybe another 2 or 3 more to come next. At this junction, an aggressive rate cut is definitely a big mistake and making US Fed nothing like a political tool. The so-called independence has lost its meaning and effectiveness. The 25 basis point cut merely just a correction of mistake for interest rate hike for the past years. Any aggressive move to cut rate now is instead a big big worrying sign.
At this junction, one has to bite the bullet to forget about there will be a trade deal between US and China. Firstly, China will not bow to US if any deal doesn't come in fairness. Secondly, even if there is an agreement being made, it only resolves a short-term issue, kicking the can down the road that all. The one who started the trade war has entered a war that can never be won and on the contrary will be damaging to itself in the long run. Trump does nothing but just blames anything under the sun and not himself for the mess he created. Sound familiar with that ? Yes, it is just like the pseudo elites who pride themselves in wearing white (white ? pride ? more like having a nut or two loose in their head) in Singapore. When others in the wrong, they will criticise strongly in gang (acting nothing like the typical trash big bully) and when they themselves make the mistakes or in the wrongs, they will blame the chicken that crosses the road, the bird that flies pass and anything under the sun except themselves. At the end of the day they will just say it is an honest mistake and let move on. So the Trump's action shouldn't be a stranger to majority of Singaporeans as we face with those everyday in our life.
China today is not the same as China a decade ago. A decade ago, they still rely heavily on manufacturing, import and export for their growth. However, they have since slowly moving away from that with restructuring of their economy to focus more on consumer and service sector. A decade ago many might not have heard of Huawei and Xiaomi in the mobile phone or Alibaba in the e-commence. Now, Huawei is chasing down the neck of Apple to be the number 2 in smartphone market and one of the leading provider for 5G technology. A decade ago a trade or tariff war with China might work but not now.
US markets in particular S&P500 breaking above 3000 level, scaling new high few weeks ago and many were excited shouting here and there on SuperCycle bull run. To be frank, nothing to be excited about. The breaking above 3000 level for S&P500 is nothing but confirm the wave count that it is in the last leg of the SuperCycle. Rather than excited, one should worry of when the music will stop and once stop it will really go ugly, very ugly. As mentioned before in previous analysis, US market and China market are on the opposite, bipolar. US market is heading towards the end of a SuperCycle degree wave 3 while China market just started the SuperCycle degree wave 3. While US markets will face the SuperCycle degree wave 4 correction (recession scenario), China market will not be on a rocket all the way up in SuperCycle degree wave 3. The sub-level of SuperCycle degree is Cycle degree and the 2 corrective phases (Cycle degree wave 2 and 4) are not something to be ignored. Both these phases will be reflected by the serious weakness in its economy. If the wave count is correct for both, when US market enters SuperCycle degree wave 4, China market will enter Cycle degree wave 2.
